In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses personal income.
- Income is typically commensurate with experience. As REALTORS® gain experience and a larger network of referrals and previous clients, their income generally rises.
- REALTORS® with 16 years or more experience had a median gross income of $50,200 compared to REALTORS® with two years or less experience that had a median gross income of $8,700.
- The number of hours worked per week also strongly correlates with income. REALTORS® who typically worked less than 20 hours a week had a median gross income of $8,600 a year, and those who worked 60 or more hours per week had a median gross income of $80,900.
- Another trend that is occurring among the NAR membership is the rise in age. The median age among members is 56 years old, which has increased from 51 years old in 2007. NAR members have increased in experience and age which is helpful to clients, but also helpful to members as they have a wide network of previous clients, which is where referrals come into play.
After some tough years, the median income of REALTORS® is set to meaningfully rise for the first time in many years. If projections of a 10 percent gain in home sales and a 3 percent rise in home prices come true this year, then a typical REALTOR® can expect to take home a 13 percent higher income than compared to last year. This presumes that there is no net increase in REALTOR® membership this year, but REALTOR® membership is not likely to increase this year because the membership figures always lag the housing market conditions by 18 to 24 months. The tough market conditions of the past two years are still impacting membership figures today.
Back in the bubble years, some members did hit pay dirt and collected huge paychecks. But those obtaining real riches were few and far between. Typical REALTOR® income during the frenzied home selling and home price years did not lead to a commensurate rise in income because REALTOR® membership grew by 75 percent right up to the peak bubble years. The pie was much bigger for sure, but there were way too many with knives looking to cut their share.
Here is the table for what occurred and what could happen. The figures should be viewed as approximate figures because all statistical measurements have some errors and because NAR cannot collect any data related to commission rates (in order to comply with the Justice Department and avoid anti-trust issues).
This derived average revenue is about the same as the median incomes obtained from the REALTOR® member survey, though not exactly. They differ slightly because average income is statistically always higher than the skewed income distribution where a few big fish can pull up the average numbers but not impact the median income. Also, there are always sampling errors with every survey. As every REALTOR® knows, the real estate industry is fiercely competitive with very uneven success. The 80-20 rule probably holds true given the entrepreneurial nature of the business, where 80 percent of total industry income goes to 20 percent of REALTORS®. For example, according to the NAR membership survey, the median income in 2011 was $34,900. Even during this tough environment, 17 percent of members grossed a six figure income. Keep in mind that REALTOR® household income, after adding up other sources such as spousal income and rental income, is considerably higher than the national household income.
As said earlier, the anticipated 13 percent rise in REALTOR® income is partly based on expectations of no increase in membership. Should the membership figures rise, for example to say 1.2 million, then the average income would actually decline despite the improving housing market conditions this year and next. Should the membership figures fall back, for whatever unknown reasons, to the average figure from the 1980 to 2000 period of 800,000 members, then the average income growth would be over 50 percent over the next two years.
Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update discusses personal income and consumer sentiment.
Income Growth
Economic expansion, though still sluggish, means more jobs and higher income generation. But as with many economic variables, there are distinct variations as to where the incomes are rising and not rising. The ultra-loose monetary policy has resulted in a very low interest rate environment with virtually no return on money sitting as bank deposits. The total interest income therefore has taken a big hit.
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